Rockstar Consortium is an entity jointly owned by some of the technology world's giants (see below). At the end of October, Rockstar filed patent infringement lawsuits against some of the other giants of the industry: Samsung, Google, HTC, ZTE, ASUSTeK, Huawei, LG, and ZTE.
Rockstar represents a new breed of business. Its model is simple: it acquires patents, then seeks opportunities to license its portfolio by reverse-engineering marketed products to identify cases of infringement. Infringers are offered the opportunity to either purchase a licence or face litigation. In the case of Rockstar, the patents were obtained by an auction of Nortel Networks Limited's ("Nortel") patent portfolio following the Canadian company's bankruptcy. Norton Rose Fulbright represented Nortel for the auction process.
Read more about Rockstar and the patent auction sale in our previous coverage of the company: Apple's legal win could lead to increased smartphone M&A and Acquiring patent portfolios of failed or failing technology companies.
The lawsuits brought by Rockstar are made more interesting by the the parties involved. Rockstar is a consortium owned by a group of leading innovation-focussed technology companies: Apple, Microsoft, Blackberry, Sony, and Ericsson. The lawsuits target the primary market competitors to Rockstar's owners' mobile devices businesses. The defendants all have in common the sale of devices using the Android mobile operating system, Google's entry in an ultra-competitive mobile operating system market that also includes Apple's iOS, Microsoft's Windows Phone, and Blackberry's BB10 operating systems. Based on the patents being asserted by Rockstar, Google's highly lucrative search business may also be a target.
Notably, these suits follow Google's purchase of Motorola Mobility for $12.5 billion in August 2011. It has been noted in the business press that Google's acquisition of Motorola may have been in response to its failed attempt to purchase from Nortel the very patents Rockstar is now asserting against it. The purchase of Motorola Mobility by Google yielded more than 14,000 granted patents.
However, Google has experienced difficulty in asserting its new patent portfolio. In a high-profile dispute before the US courts, Google sought license fees under Motorola's patents, but was denied recovery. Rather, a federal jury found that Motorola had failed to license its standards-essential patents (SEP) related to video and wireless standards on FRAND (fair, reasonable and nondiscriminatory) terms, in breach of its industry obligation to do so. As a result, the jury awarded Microsoft approximately $14.5 million in damages. For a more comprehensive discussion of this case, click here.
While the giants of the tech world continue to do battle in and out of court, the change in tone these events represent will have significance for businesses of all sizes.
Rockstar, Google, and the other parties to the dispute may be looking to acquire patents that could read on each other's products and methods. This litigation trend therefore presents an opportunity for businesses to raise capital through the sale of patents to products-and-services businesses capable of asserting them as part of a broader defensive or offensive portfolio strategy. Alternatively, patentees may look to sell their intellectual property to Rockstar-like entities seeking to earn revenue through licensing fees.
In any case, enforcement and litigation inevitably put the scope and validity of patents in issue. Thus, the recent trend toward increased enforcement and litigation underscores the importance of having a portfolio of broad, defensibly valid patents. Microsoft and Google's recent litigation is a case-in-point.
While the trend toward litigation is an advantage to some participants in the technology space, certain businesses may see the costs of doing business rise as patent licensing entities demand licensing fees in exchange for avoiding litigation. This is clearly the case in the mobile device market.
Meanwhile, in technology hubs close to home, such as Waterloo's Communitech and Toronto's MaRS district, budding entrepreneurs and growing start-ups should turn their eye to their own technology-focussed products and patents and consider what opportunities and challenges exist. Norton Rose Fulbright possesses extensive expertise in these matters: please consult one of our professionals if you have any questions.
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